{"id":547862,"date":"2022-07-17T03:57:23","date_gmt":"2022-07-17T03:57:23","guid":{"rendered":"https:\/\/enterpriseam.com\/egypt\/2022\/07\/17\/the-2022-em-debt-sell-off-is-getting-serious-wire-services-warn\/"},"modified":"2022-07-17T03:57:23","modified_gmt":"2022-07-17T03:57:23","slug":"the-2022-em-debt-sell-off-is-getting-serious-wire-services-warn","status":"publish","type":"post","link":"https:\/\/enterpriseam.com\/egypt\/2022\/07\/17\/the-2022-em-debt-sell-off-is-getting-serious-wire-services-warn\/","title":{"rendered":"The 2022 EM debt sell-off is getting serious, wire services warn"},"content":{"rendered":"

<\/a> Default on the horizon? A record number of emerging markets are <\/strong>facing pressure as debt sell-off grows: <\/strong>Soaring inflation and rising US interest rates have sent investors fleeing emerging market (EM) countries this year, leaving \u201ca record number of developing nations\u201d facing possible default, according to Reuters<\/a>. Taking into account falling currencies, dwindling reserves and 1,000 bps bond spreads, the newswire has named a dozen countries, including Argentina, Ecuador, <\/strong>Egypt,<\/strong> and Tunisia<\/strong>, as approaching the \u201cdanger zone\u201d due to rising borrowing costs, inflation and debt.<\/p>\n

Readers will recall that <\/strong>Bloomberg is also on the story<\/a><\/strong>, saying Egypt joins El Salvador, Ghana, Tunisia and Pakistan as being vulnerable to default. The business information service quotes one portfolio manager as suggesting that \u201cabout 10% of USD-denominated sovereign debt is at a high risk of default. \u2026 Russia and Sri Lanka have already defaulted this year, and there\u2019s now a record 19 developing countries with sovereign debt trading at distressed levels<\/a>.\u201d<\/p>\n

Don\u2019t look at the yields:<\/strong> Yields on sovereign bonds of more than 12 developing countries are now trading at distressed levels, the FT<\/a> writes, parsin Bloomberg data. \u201cIt\u2019s pretty shocking to see this scale of a collapse in bond prices,\u201d said Charlie Robertson, global chief economist at Renaissance Capital, adding that the sell-off is \u201cone of the biggest I\u2019ve seen in 25 years.\u201d Investors have pulled USD 52 bn from EM bonds so far this year, according to JPMorgan.<\/p>\n

A spate of defaults isn\u2019t necessarily in the cards<\/strong>, according to some analysts who say that soaring yields are more an indicator of global economic headwinds than fiscal strains in all of these countries. \u201cThis is more a sentiment thing than a fear that countries will fall into default<\/strong>,\u201d an investment manager at Amundi said. \u201cBut if this is prolonged, obviously it will increase funding costs for those countries and that will feed back into their ability to pay.\u201d<\/p>\n

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